Buy Now Pay Later app Klarna axes popular financing product used by 90,000 shoppers just weeks before Christmas amid technical issues which have affected customers’ credit scores

Buy now, pay later app Klarna is axing a popular financing product used by 90,000 shoppers just weeks before Christmas amid a spate of technical problems.

The company says the closure of the Funding Account product is not related to issues that have occurred over the past five weeks with refunds not being recorded.

The regulated credit product allows customers to spread the cost of expensive purchases such as furniture, phones and other technology.

At the beginning of October, customer payments made through these accounts, which were made by direct debit, were not recorded and were classified as ‘missed payments’ – which could impact creditworthiness.

Klarna says it is aware of the issue and it will be resolved before the next payment date in December.

The Financing Account, used by approximately 90,000 customers, allows users to spread the cost of expensive purchases over a period of six to 36 months.

But the product will be phased out once current debts are paid off.

The accounts work like a credit card and can therefore be used for multiple purchases that can be paid off gradually with interest at the same time

This is different from the ‘buy now, pay later’ scheme, which only applies to one purchase at a time and will not be affected.

Of Klarna’s 18 million UK customers, 0.5 percent use the financing account – around 90,000 people in total.

Klarna’s website states that customers can select the ‘Financing’ option at checkout and choose their preferred timeline and interest rate.

The website also states that a credit check is performed when someone applies for a financing option.

The first payment is due one month after the store processes the order and is due monthly on the same date until the order is fully repaired.

But at the beginning of October, customer payments through these accounts, via direct debit, were not registered.

Although the money left customers’ bank accounts, Klarna’s system did not link them to the Finance Account, making it appear as if users were not refunding purchases.

These ‘missed payments’ can affect users’ creditworthiness.

One customer who experienced this issue said they notified Klarna but heard nothing for over two weeks and customer support ignored their messages.

Shawn Smith posted on

‘This is not good service and customer support is ignoring my messages because it is with a specialist, but it has now been more than three working days.’

Another user replied saying, “Same here. I messaged them twice. They say there is a problem with their payments.

‘It would be helpful if they would contact those affected. I turned off autopay so I don’t get charged twice.

“(It’s better) not impacting my credit score because of a missed payment or incurring fees.”

Another user wrote: ‘Klarna has received three payments from my bank, none of which are showing on my Klarna account, and now I’m getting emails about missed payments even though I’ve now overpaid.’

When Klarna became aware of the problem, it said it would stop providing information to credit reference agencies such as Transunion so that the problem would not affect the creditworthiness of their customers.

This came too late for some users, but the company said it is now working to correct these credit files.

This is what a Klarna spokesperson said The sun: ‘We are deeply sorry for the inconvenience caused to a small number of customers using one of our legacy financing products.

‘The issue will be resolved before the next payment date in early December.

‘We are taking action to ensure that this matter does not leave a mark on the credit files. Our other payment products, including BNPL and Pay Now, are not affected.”

MailOnline has contacted Klarna for comment.